Effects of wars on the Philippines

FROM FAR AND NEAR - Ruben Almendras - The Freeman

There are nine ongoing armed conflicts in the world that may be considered major wars, as it has killed and injured thousands. Seven can be considered civil wars as the protagonists are from the same country, but two, the Ukraine-Russia war and the Israeli-Hamas war can be classified as World Wars. The seven civil wars are in Syria, Yemen, Iraq, Afghanistan, Somalia, Libya, and South Sudan. These civil wars have minor effects on the Philippines, as we hardly have any political and economic relations with these countries, and our OFWs are no longer in any of these countries. It is the Ukraine-Russia and the Israeli-Hamas wars that have affected us and will continue to affect our country and people.

The Ukraine-Russia war has been going on for over a year and does not look like it will end soon. While the initial effects of the higher fuel and commodity prices, the supply chain disruptions that created scarcities of materials, the global inflation and the debt problems of many countries have been absorbed with varying degrees of difficulty by most countries including the Philippines, it has not been solved and will continue to destabilize governments. Philippine GDP growth will be constrained to be in the 3% to 4% range for the next two to three years, while grappling with an enormous debt burden and high inflation. Politically, due to our alliance with the western democracies, our relations with Ukraine and Russia were minor and distant. It was only during the Duterte administration when Philippine-Russia relations were activated and we ordered Russian military equipment that the government made a ?1 billion down payment that has not been delivered or refunded. Our relations with Ukraine were trade transactions of agricultural products and technology parts that were even coursed through third parties. We have a few BPO clients in Ukraine, but we scarcely had any OFWs in Russia and Ukraine.

The Israel-Hamas war is what should concern the Philippines now, especially if the scope of the war widens to involve more countries and if it will last for years. All are hoping that recent developments, such as the release of two hostages and the opening of the Egypt border to trucks for humanitarian supplies will lead to de-escalation and peaceful solutions. The flexing of the US military muscle by sending two aircraft carrier groups to the Middle East and the demonstrated capability of intercepting rockets/missiles in the air from the Hezbollah side, may also prompt the Arab nations to tame the extremists in their territories.

The immediate impact of the Israeli-Hamas war on the Philippines is financial in terms of expenses to secure, repatriate, and assist the Filipinos in Israel, Palestine, and neighboring areas. Then there is the loss of income from the OFWs in these places and the potential loss due to the suspension/reduction of the deployment OFWs to these countries. This could be 20% of annual total OFW remittances to the Philippines or 2% of our annual GDP. The bigger hit to our economy will be in the possible higher oil prices, if this war will disrupt oil supply from the Arab countries. We import 50% of our energy needs and higher oil prices means higher electricity, transport, and consequently all commodity prices. As we are still absorbing the high inflation and slow growth scenario from the other war, this will further dampen our economic prospects for the next three years at least.

On the political front, the Philippines’ warming relations with the Arab countries may stall as we are perceived as pro-Israel historically, ideologically, and through Christianity. The unpaid salaries of our Overseas Filipino Workers in Saudi Arabia will be in limbo and the treatments and civil rights of our OFWs will be in the back burner. As a US/Western democracy-allied country, the longer this Israel-Hamas war will last, the more overtly will our political leaning be evidenced, which may stoke unrest with our Muslim brothers among us.

While both ongoing world wars have not hit the Philippines directly, the economic and political side waves are big enough to destabilize a country of our size, level of development, and vulnerabilities. Given the quality of our politicians, the competence of our government officials and overall level of governance, we have to brace for a slower economic growth at best and hope it will not be worse.

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